Assicurazioni Generli Adr

Good afternoon. This is the Coral School conference operator. Welcome and thank you for joining the Generali Group 9 Month 2025 results presentation. As a reminder, all participants are in listen-only mode. After the presentation, there will be an opportunity to ask questions. Should anyone need assistance during the conference call, they may signal an operator by pressing star and zero on their telephone. At this time, I would like to turn the conference over to Mr. Fabio Cleva, Head of Investor and Rating Agents Relations. Please go ahead, sir.

Hello, everyone, and thank you for joining our call. Here with us today we have the Group General Manager, Marco Cesana, the CEO of Insurance, Giulio Terzeriola, and the Group CFO, Cristiano Borean. Before opening for the Q&A, let me hand it over to Marco and Cristiano for some opening remarks.

Hello, everyone, and good morning, and thanks for being with us today. So, today, this set of results confirmed the Lifetime Partner 27 Driving Excellence Plan as starting on a very strong footing, thanks to, in particular, to the excellent performance of our P&C business. Implementation of the strategy and of its work stream is the key focus of the entire group. One of the most relevant changes that we made in this strategic plan is reinforcing the role of the center in orchestrating more organically strategic business initiatives. Each group management committee member is sponsoring one of the planned strategic initiatives with the key head office function working in close cooperation with our business unit. We are reaping the benefits of being a group. As part of this approach, the whole GMC is very focused in sharing best practices and scaling up local initiatives. I could list many exciting developments I've seen over the past nine months as part of this interaction, but let me just highlight three that I found particularly compelling. First, sophisticated NATCAP modeling in major countries such as Italy, France, and Czech Republic. So we developed a machine learning model for wind storms, severe convective storms, combining internal claims data with external weather data through machine learning systems. And this approach will soon be scaled to other countries. Second, claims automation in Austria. A great example of automation and speed of automated health claims reimbursement. which have now reached 56% of automation for invoice processing, and pharmacy invoices are settled in just 18 seconds. And finally, our group geospatial platform. This provides advanced geospatial capabilities for underwriting purposes. This is already live in Italy, France, Spain, and across the world in our global corporate and commercial business, with further expansion in other business units planned for 2026. When I see this initiative on the ground delivering tangible results, I'm very confident in our journey of delivering excellence. So, let's now focus on our nine-month result. P&C continues to show positive momentum in terms of both top line, up over 7%, and margin expansion. with the undiscounted combined ratio improving by over 2 percentage points compared to last year. At the beginning of the year, we told you that we were very confident about our development thanks to the combination of larger volume coming through and sharp portfolio repricing in an environment where frequency is declining and claims inflation is under control. As you can see, we are very much on the right track to achieve our undiscounted combined ratio target well ahead of schedule. The top management team is thinking strategically about cycle management to ensure a continuous improvement in the combined ratio supported by our historical and reinforced technical excellence and to make today's underwriting margin resilient in the future. You can see this in the discipline we apply to underwriting, you can see this in our country-specific pricing approach, and you will increasingly see this in the benefit we expect to generate across the P&C value chain from new digitalization and automation. In this quarter, as Cristiano will later explain, You can also see this in an even more conservative approach to initial loss peaks and clearly even more visible in the prior year development. What we see is an insurance sector that has been disciplined and continues to be disciplined. I want to reassure you that as part of the sector, Generali will be a force of discipline as the cycle progresses. Our P&C top line is continuing to grow and is mostly driven by the price effect, which we measure as the improvement of the average annual premium for the retail and SME segment. This pricing effect remained very significant at nine months, at plus 6.4% for motor and plus 5.2% for non-motor retail and SME. Looking at the technical margin, we achieved continued improvement in the average earned premium in comparison with that of the risk premium, resulting from the combination of claim frequency and claim severity. In motor, which represents around one-third of our P&C portfolio, the average earned premium increase for our top 10 market exceeded 10% at nine months. while the risk premium rose around 1% thanks to the decrease in claims frequency in most of the countries, coupled with well-contained claims inflation. In on motor, the industrial KPIs point to an improvement in the current year attritional loss ratio of around 1.2 percentage points, very much spread across the majority of the business units. At 9 months 25, the non-motor combined ratio is at 91.4%. These dynamics are at the core of the significant improvement in our P&C profitability and will continue to drive the improvement in the combined ratio. I thought it was helpful to provide you this context and we are happy to help you bridge the P&C industrial QPI with our reported combined ratio in the Q&A. Now, moving to life, let me remind you of our target to gather between 25 and 30 billion of cumulative light net inflow in our lifetime partner 27 plan. We have exceeded 10 billion in nine months with a very good result for protection and health with 3.7 billion and hybrid and unit link with 4.7 billion. The improvement in the live net inflow is a function of both the effectiveness of our distribution and the evolution of our product offering. Live net inflow also improved thanks to the reduction of surrenders. Just to give you a sense, surrenders at 9 months compared to the same period of last year were down by almost 2.6 billion in Italy and by over 500 million in France, consistent with our previous comments on the improvement in lapses. In the first quarter call, we give you a new business margin guidance for the remaining of the year. between 5.25% and 5.75%. In the second quarter, we had a 5.64 new business margin, and in this quarter, we recorded a 5.74 new business margin. This demonstrates that we have done quite well, not only in terms of volume, but also in terms of margin. You will have noticed that at nine months, the growth of new business value has also turned positive year on year. In addition to volume and marginality, let me also confirm the underwriting discipline of this new business with some key data points on the quality. Over 73% of our new production has no guarantees compared to 66.4% in the same period of last year. The share of new production coming from capitalized products is close to 85%. So, to summarize, we continue to have strong net flows with improving margin and confirming our underwriting discipline to ensure long-term resilience of our in-force book, also thanks to the ongoing quality of the new business. Now, moving to investment portfolio. As you know, we have an allocation to private market that is more limited than the one of our main peers. It is around 18%. We do see value in a diversified portfolio, and therefore we continue to aim at increasing our allocation to alternatives in a disciplined way. Our portfolio of alternatives is balanced with strong safeguards to ensure it meets our strict criteria. When you look at the private debt portfolio of around $19 billion, almost half of it is in real estate debt and infrastructure debt, both having a high-grade credit quality. Around three-quarters of our private debt portfolio is secured by collateral and our exposure to single borrowers is very limited. The allocation to direct lending, which has been the focus of the market recently, is around half of our private credit portfolio and is therefore less than 3% of our general account. Also, the vast majority sit in live portfolio with policyholder participation and very low guarantees. Only 23% of our private debt portfolio is in the U.S., and thanks to our Street Investment Guideline, we have had hardly any exposure to credits which have been in the news recently. Given this strong framework, we are very comfortable with our portfolio. We continue to believe that there is value in gradually diversifying our government bond exposure into credit, as I explained to our investor day in January. Our strategic asset allocation move is also well informed by the trends we are seeing in the government debt market, where there were also some downgrades recently. So to summarize, the very strong start of our strategic plan, coupled with the prudence we are exercising across the board, provide us with confidence that this trajectory will be maintained and will prove its resilience to a volatile external context. Thank you for your attention and let me now hand over to Cristiano.

Thank you Marco and hello everyone. Let me provide you some additional color on our financial performance as well as some indications about the direction of travel in the fourth quarter. Let me start with P&C. As Marco described, the business performance has been very good. And we are working to make sure that the strong margins you see in the current tier attritional combined ratio today will continue to improve in the future. In the last couple of years, the insurance industry and generally have had a severe not-cut experience. Our 2023 and 2024 NatCat impacts before reinsurance were well above the expected yearly losses. As you have seen, historically, the second and the third quarters are the most relevant in terms of NatCat seasonality in our portfolio. So far, 2025 has been quite benign and well below our ex ante 2.8 percentage points nutcat budget. In light of this, we thought it appropriate to exercise an even stronger prudence on our reserving, always within the range of reasonable best estimate. This translated in a much lower prior year development, as well as even more prudent initial loss peaks for both the attritional and the nut-cut component. Therefore, we further strengthened our balance sheet, making Generali very resilient in future years. Together with the accelerated trajectory observed in our P&C performance compared to the plan, this approach increases our confidence to exceed the Lifetime Partner 27 Driving Excellence key financial target. There is an old saying in financial markets, the income statement is your past, the balance sheet is your future. Having a balance sheet with a low debt, solid solvency, high quality of capital and reserving makes me very comfortable that Generali is well positioned to prove its resilience. The fourth quarter nut-cut experience has been benign so far too. If this continues until the end of the year, in the fourth quarter, you should expect a prior year development pattern similar to this quarter. This would imply a full year 2025 P&C operating results of around $3.6 billion. A more dynamic interplay between nut-cut and prior year development is, in our mind, the sensible thing to do when managing the business for the long term. Therefore, looking ahead in 2026 and beyond, we will calibrate our prior year development dynamically, always within the boundaries of the best estimate approach. I hope this clarifies the very low prior year development contribution of this quarter and provides you a perspective on our thought process, which will always prioritize long-term sustainability of results versus short-term impacts from volatile components. This approach also enhances earnings predictability and mitigate P&L volatility. Let me now move briefly to the life business. When looking at the nine months 2025 results compared to last year, the 1.8 percentage point growth of the operating result should be read as a four percentage points of growth after accounting for the stricter discipline on cost allocation from non-operating to operating results for around 30 million euros. and excluding the lower investment income from Argentina. As of the end of September 2025, the group enjoyed strong new business volumes and positive economic variances, both supporting our CSM development. This was only partially offset by some operating variances in the region of 200 million euro due to a tax regulation change in Germany affecting health business profit sharing and some model refinements. Looking ahead, as I have mentioned to you previously, during the fourth quarter we performed the full annual review of all actuarial assumptions on longevity, morbidity, lapses, expenses, as well as model refinements. The discussions on this are ongoing and will be finalized by year-end. Just to give you an indication, I would expect negative operating variances for less than 1% of our reported life system stock. Moving to non-operating result, let me anticipate to you that we expect additional restructuring charges in the fourth quarter, and we may also see some impairments on real estate portfolio. This will be partially compensated by a lower tax rate as we have some positive tax one-offs expected in the fourth quarter. When you take all these one-off effects into account, I think that with the information available as of today, an adjusted net result projection for ERN25 of around 4.25 billion euros would probably be a good ballpark. Moving to our capital position, the group solvency ratio remains solid at 214%. thanks to our healthy normalized capital generation and already fully embedded the 500 million share buyback program. Looking ahead, let me share with you some of the key factors that we expect to impact our solvency in the fourth quarter. In addition to the standard review of the actuarial models and assumptions, First, the acquisition of MGG is expected to have a minus 2 percentage point of solvency impact. Furthermore, as we stated in our half-year presentation, and should be already known, that in the fourth quarter there will be a temporary effect related to the loss of the internal model application for Spain as part of the Liberty integration, which is a reverse merger, as we said. with an impact of around minus 4 percentage points. This is expected to revert in 2027, being completely temporary. In the fourth quarter, you should also factor in non-economic variances of around minus 1 or minus 2 percentage points impact on solvency, mainly stemming from the ongoing implementation of the SAA optimization, which Marco was referring to. In addition, the rating downgrade of the Republic of France that occurred in October is expected to reduce our group solvency ratio by almost one percentage point. Regarding subordinated debt movements, the 500 million redemption in November will be offset by 500-ish million issuance of our inaugural restricted T1 bond. Before closing, let me summarize. We manage the business for the long term with a focus on sustainable value creation for our investors, also reflected in an EPS that is growing 16% year on year. The Lifetime Partner 27 Driving Excellence Plan has started very well and the whole management team is focused on building on this momentum with a clear objective to do our best to exceed all our key financial targets. Thank you for your attention.

Operator, we are now ready for Q&A.

Thank you. This is the Coral School Conference operator. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. To remove yourself from the question queue, please press star and 2. Please pick up the receiver when asking questions. Anyone who has a question may press star and 1 at this time. The first question is from David Barma, Bank of America. Please go ahead.

Good morning. Thanks for taking my questions. Firstly, on P&C, could you come back, please, on the average gap between written premium growth and lost trends? I'm not quite sure I got the numbers that you gave in the opening remarks, Marco. And if you could highlight the main country drivers within that, it would be great. And then staying on P&C, on the expense side, and particularly on the administration expenses, could you give some color on how that developed in the quarter and whether you expect some of the measures that, Marco, you discussed in the intro to already benefit the expense ratio? in 2026, please. And then lastly, on the life business, so sales were obviously really strong and the mix too. You're getting close to your 2027 new business margin target already. Are expenses the main piece missing to get you to bridge that to 6%? Thank you.

Thank you very much, David. The first question, of course, is for Marco. The second one is for Giulio, and the third one is for Cristiano.

Hi, David. Good morning. So I go back to what I said during the speech. So what I mentioned was the growth of non-motor average premium at 7%. And the growth of the risk premium was at 1%. So let me just give a word to clarify what we mean when we give these measures. So we are measuring in motor what we see coming through as the average premium of the single risk. So that's what we see showing up. And we measure the risk that we have in the portfolio. So when we give these two measures, What is important is to see that there is a margin, a gap, between how much the risk is growing and how much the average earned premium is growing. In this case, 6% is very significant in terms of spread, in terms of margin. That means that in the portfolio that we have in the different business units, there is an underlying potential to deliver more improvement in the loss ratio. So where do we see this? I would say we can go into the different detail, but I would say that this is very spread across the top geographies. In some cases is more, I would say it's more pronounced, in other cases it's less pronounced, but I hardly see any cases where we are not in this situation. I could mention two geographies that I think are interesting. One is Germany, because we focus, like in the last three years, we really focused during this call in showing how much we were repricing the portfolio. And the effort done by the German business unit is really significant, which, by the way, I want to thank the colleague for this. So we have done three consecutive years of double-digit price increase. And I think the results are showing up, and we do see a significant improvement in the portfolio. The other geography is clearly Italy, which is going really well in terms of repricing versus the increase in risk. And also there we see a margin into the portfolio that is really significant. If you want, then we can go on more detail. But this is the picture that we see for motor. And I think this is what I mentioned. And I think it's a really positive news for the future.

Thank you, David. On the question regarding the expenses, maybe let's start from the expense ratio. The expense ratio for the nine months is going up 50 basis points. Here we need to keep in mind that we have the impact of the purchase price allocation coming from the Liberty Acquisition and also that we made some reclassification of expenses from non-operating to operating. So if you adjust the expense ratio, basically the expense for these impacts, the expense ratio is flat. Now to your question about the admin expense ratio, we are measuring the JAX ratio, which is basically the component of the expense ratio, which are not commission or incentive. And that number is going down by 50 basis points. So that's an improvement. We don't see the same improvement in the expense ratio because of a little bit of mix. but also there is some conservative provisioning from the business unit. So moving forward, we'd like to see clearly a better alignment between the improvement of the admin experience ratio, the experience ratio, And also at the end of the year, anyway, we are going to report also the admin experience ratio so that you can see the development of the KPI, and then clearly we are going to provide you also some more transparency about the movement of the other line items going into there. But from an efficiency point of view, we are definitely improving, and that's going to be also a driver of improvement as we think about 2026 and 2027.

Hi, David. Regarding the lifesaver and the driver, yeah, I would say up the first nine months already, higher growth compared to the acquisition cost is impacting 16 basis points onto this improvement, but the farther way to project forward should embed also the focus on our protection business, which is something running at almost double-digit present value new business margin, and this is supporting a much better market and this together with product features where you can even simply improve the features, adding extra value and not only managing on the part of the cost is driving it. But we are already on that trajectory. There will be also an extra focus on this topic, but it will not be the only driver to get there.

Thank you. Thanks, David. Next question, please.

The next question is from Michael Hoffer, Barenburg. Please go ahead.

Fantastic. Thank you so much for your... Lovely results, lovely disclosure. I just had two. One is on the solvency, there are so many negative numbers. I came away with a conclusion, which I didn't add them up, but clearly it will be down quite a bit. So let's say it's down 10 points. I'm just rounding it. And I just wondered here, can you remind us, are there any positive offsets here? So clearly operating capital generation, probably five points a quarter. And then I have no idea. Maybe you can say whether some of this resiliency or prudency you're building in, whether that's. including the operating capital range frame or not. And then, of course, the SOMC2 review. So just a little bit would be lovely. Then on cash, I always like cash. And here, everything is doing so nicely. I'm just wondering whether Switzerland is returning your 400 million now. And then the final one is on net inflows, which is an outstanding number. Even POSTI doesn't have such a good number. I just wondered whether you can talk a little bit about what's driving this and what's what it could mean for earnings growth going forward, because clearly this isn't in earnings. It's in OCG, but not in earnings. Thank you.

Thank you very much, Michael. The first question on the solvency movements and the one on the Switzerland remittance are for Cristiano, while the one on Leibniz inflows is for Giulio.

Hi, Michael. So first of all, I think I start from a point. What happened already is the Spain from October 1st, 2025 has lost temporary, I already said, up to 2027, the internal model eligibility. It is a four percentage point solvency group impact, which was already signaled a half year, so it's not new. And I see also the projection by all of you for the year-end are positive. pretty much embedding all what I already said. I think the two points of MGG were already signaled also in the press release, so it's something known. I think the only point, which I repeat, in 2027, Spain will reverse these four points. Probably the downgrade of France, which is slightly less than 1% of this point, is significant. something not in. But this has already happened, and if I just look at November the 10th solvency ratio, which was the last updated number, we are basically 210%. And this is already embedding both the MGG acquisition, both the France downgrade, and the four points of Spain. Clearly, what I was highlighting is you need to take one to two points on the SAA-Farber asset allocation improvement for the year to come. So it's not a huge number, and I think you are perfectly in line, and I think giving the November is giving you. Let me speak a little bit about the Solvency II also review going forward. Okay. One of the things which I think it is relevant for the Solvency II review, as we always said, is that we were between the 10 to 15 percentage point of benefit. I would say that the latest version of the delegated acts which has been approved and still needs, in any case, a discussion with the College of Supervisors on very minor topics, which has some uncertainty, bring us, I would say, on the top end of this range of the 10 to 15, which is, I would say, positive also to allow us implementing our EPS accretion investment. Speaking about cash for Switzerland... For Switzerland, we both are extremely focused, you and me, and not only you and me, many people in our company on this. I can confirm you that in the plan we are going to start seeing repatriation of excess capital, including money. remittances and capital support done. It will be gradual, and I think you should see this more coming in the end of the plan from 2027 onwards. There will be some positive 2026 potential expectations supporting our cash flow, but it is a gradual process. The company is fully focused now to increase the business result, and that will be further supportive out of this.

No, thank you, Mike. On your question about the NIT inflows, yes, actually the development is pretty good and it's better compared to our plan because we were not planning to cross the $10 billion threshold this year, but now as you see the nine months, we're already about $10 billion, so you can imagine also that we are going to have positive inflows in the last quarter. From a composition and inflows point of view, we see basically growth across all the different line of business. From a geographical point of view, I can tell you Italy is up 1.3, 1.4 billion compared to last year. What we see in Italy actually is not so much the premium up, it's more that the surrender down significantly. In France, we are about 300 million beta. Also here, we have a similar situation. So from a premium point of view, we are relatively flat, but surrender much down. And in Germany, we're also up. And here, we have growth in premium and less surrender. So we see a similar dynamic in the different markets. If you look at the last quarter, also there was a good dynamic on the inflow, so quarter-by-quarter. You can see also that the present value in the business premium in the third quarter was ahead compared to last year, so we went from negative growth in present value in the business premium to positive growth. Also, the new business value is going into positive numbers, so really working in the right direction. From a profit point of view, you know the concept of the tab of Cristiano, that if you feel the The tab, you're going to get more profit. So basically this is reflecting anyway in a better composition between the release of the CSM and what can be the increase of the CSM due to no business. Also how the lapses are going down. Remember that last year we had negative variation, negative experience variances due to lapses. and this year the negative variances due to lepsis are non-existent, so that's a positive that translates into better CSM release eventually.

Just one thing, a lovely explanation. France, what was the figure? You said something lower, 300 or 900?

France is about 300 million plus of inflows, 300 million plus of inflows coming from hybrid and unilin products. That's what we say basically in France, and protection is also a nice contributor.

Lovely.

Thank you so much.

Thank you, Michael.

Next question, please.

The next question is from Ian Pierce, BNP Paribas. Please go ahead.

Hi. Just one from me. I think in the introductory remarks, you mentioned some benefits from frequency. I was just wondering if you could elaborate what you're seeing on frequency, sort of if you're seeing some different trends by markets. And also, if you're viewing this as a long-term lower frequency trend, or if there's anything abnormal in what you're seeing in frequency at the moment.

Thank you very much, Ian.

The question, of course, is for Marco. So let's start with the general picture. We do see the decrease in frequency very broad on the different markets. So I couldn't pick one single market that is an outlier. So this is really showing off in every single market. So whether this is a trend that we are going to see in the future is a different question. So let me elaborate. So I do think that we are going to see this again in the future, but let me explain to you why. So we have... two set of drivers, I would say. So the first is frequency is historically coming down in every market. So we are seeing a long-term trend of decreasing frequency in all the Western European markets, and I would say it's also Eastern European markets. So it's consistent, and so therefore I think this is going to happen in the future. There is a second driver, which I think is really important to mention because sometimes we always think that frequency is an external factor, but we have worked a lot on the quality of the portfolio. We have worked a lot on a few initiatives. One is loss prevention, so we are trying to put on the ground tools to make sure that we evaluate correctly every single risk that we take. The second one is pruning, so we have cleaned the portfolio from all the tail part of the portfolio that were unprofitable or as a prediction would look unprofitable. So this is something that we have driven, that we think is going to give us benefit in the future in terms of frequency. And so when we think about frequency, you should always think a long-term trend, but also the type of active work that we have been doing over the past month in the quality. By the way, if you want a proof point of this, you could look at the trend of the man-made losses that really came down in the last quarter, thanks to all the initiatives we have done. That's it.

If I could just quickly follow up. Do you have a view of how much the combined ratio is benefited at nine months from lower frequency versus your expectations?

So I would say in terms of... industrial kpi so as we said it's always there is always a link between the industrial kpi and the financial kpi but clearly then we you need to look at the different prudence that has been taken and everything probably in the risk in the risk premium that we have this has been the main factor of benefit that we see in the risk premium thank you thanks to you yang next question please

The next question is from William Hawkins at KBW. Please go ahead.

Hello, everyone. I've got three questions. I hope I can be brief. Thank you already, Christiana, for what you said about the conservatism in your loss picks. I get the idea of what you're saying. I'm still not quite clear. In the nine months attritional combined ratio, how many percentage points of conservatism was there in that pick? Because, you know, before PYD, obviously that ratio improved. It just would have improved more if you hadn't been prudent. So I'm not quite sure the percentage point drag from the prudence. Secondly, please, you know, now that you're very clear that you're managing your combined ratio, I think it is a reasonable question to ask, therefore, how much is expected to improve per year? Because you're clearly managing so that, as you said, it will improve per year. And I don't know if we're talking 20, 50, or unlikely 100 basis points. And adjunct to that, how are we ever going to know when the underlying environment is making that improvement less sustainable? Because it's great that you're now managing the number, but I'm not quite clear how I'm going to know when you're losing the capacity to manage the number in the future. And then thirdly, please, you've already talked a lot about the great life new business result. I'm still not quite clear. The thing that stands out to me is the present value of new business premiums. seemed seasonally very, very strong in the third quarter. Normally, everyone's on holiday, so that number dips 10% or even 20%. This time, it only dipped about 5% from the second quarter, and that can't be anything to do with surrenders because it's PVNBP. So, you know, what was the explanation for that, and is this the new normal? Is 3Q now going to be a lot stronger than it's been in the past few years, or should we go back to seasonal dips in the future? Thank you.

Thank you very much, William. The first question on the conservativeness is for Cristiano. The second one is for Giulio, while the third one, I'll leave you with this again for Cristiano.

Thank you, William. So, clearly, as we didn't exactly mathematically disclose the conservativeness of the prior year, but you can reverse back it yourself in any case, I try to answer with a different angle. The industrial development that Marco is seeing has an improvement which is 0.4 percentage points better than the one you see in the accounts, which is a way to try to second guess your question, I think, to help you extracting this point. I go to the second one, I think, Giulio.

Thank you, William. Your question about the improvement in the combined ratio, first of all, from a price environment point of view, we think the next year clearly the gap between the price change and what we call the risk premium is going to narrow. but it's not going to vanish completely. So we might still have a little bit of room in a motor, potentially also in a no motor, where we see also that the frequency tends to go lower, which is a consequence also of the action they were taking. So we might still have a benefit there, which is not going to be as strong clearly as what we are seeing right now, but let's say there is still a little bit of way to go. Then the other improvement should come over time from the initiative that we have on the claim side. You remember we discussed that also in January that we have an initiative on the efficiency and effectiveness in claims. Here we have all the work we do on the network theory, on anti-fraud, all these kind of elements. Pricing sophistication might help also to get more granular on some pricing. And then one driver moving forward of improvement in the combined ratio, that's going to be definitely something where we need to focus, is the expense ratio. So we go back to the improvement of the expense ratio that we're already seeing from an admin point of view, and we want this improvement to continue in the next years and reflect also in the total expense ratio that you see. So it's a combination of still some way to go. Some additional, I think also about, by the way, the work that we are doing in Switzerland. Switzerland is at the moment having a combined ratio of 100%. It's now going to be the future, so also we're going to have some improvement on some pruning or turnaround, some improvement coming from currency initiative, then the expense ratio. So let's say that our journey to improve our marginality, which is already very strong, is not finished.

Yeah. Just to clarify, I was speaking about the basis, not the delta, the basis before the two in order that you get that we increase this basis to answer to your question. To the question on the PVMVP. First of all, the third quarter is still compared to other quarters. I know that in the third, as you said, people should stay on vacation on the summer component, but I would say it's still weaker than the previous quarter. I've seen three major drivers of inflation. improvement, which are geographically aligned in especially France, where you had a very strong third quarter. And I think it is related to the very positive and stable return you can get from the saving component of our hybrid product. And that was clearly also linked to the not attractive anymore, Livre A product. return given to the, let's say, low affluent to retail. On top of this, we had a small kick-up from a new distribution agreement, which is opening up in Portugal with our postal partner bank, CTT, together with the strong growth, which you've seen are basically all over the board, and it's not generally specific, but we are seeing in both Hong Kong and the mainland China, which is a kind of market trend.

Thank you for the call.

Thank you, William. Next question, please.

The next question is from , JP Morgan. Please go ahead.

Hi, everybody. First question, you kind of partially answered it, but you gave the average premium versus risk premium numbers for nine months. What is it in 3Q? We are already seeing a closing. That's my first question. Secondly, given everything that's gone on Italy, are you willing or able to talk about the bank assurance opportunity for you now in your life business? You've been very quiet about that. Obviously, stuff has happened. Stuff could have happened and didn't happen. Just wondering whatever you feel like you can say about that. And the last question on non-operating. So you're indicating a slightly higher restructuring cost, which will limit your adjusted net result. But I remember back at the CMD, you talked about how the non-operating kind of holding expenses line is too high and will come down over time. How should we think about that going forward? Because it's obviously a big component of your adjusted net result, and I think we don't, all of us, or certainly me, spend a lot of time thinking about it. Thank you.

Thank you very much, Farouk. The first question is for Marco, the second is for Giulio, while the third one is for Cristiano.

Yes, so let me say that, yes, we have disclosed the number for the nine months, You know, what we see in the third quarter is broadly in line with what we see in the nine months. Clearly, again, we could go in much bigger detail on the different geographies, so there are some specific... So, for example, when we... I can tell you about Germany, where you have a renewal of the portfolio that is clearly in the first part of the year. The third quarter looks a little bit... how can I say, weaker in terms of development and that is fine. So historically that is the case. So I would say we tend to give the nine months result because we think over the year are more stable and are more indicative of the different development. So that's about it. So Italy is still very strong. Probably in France we had to do some pruning. So the average... premium it's probably weaker but overall in line with the development of the year so I couldn't spot in the third quarter anything that is like non-normal or it's diverging from the trend that we showed on the nine months

So your question about bank assurance. First of all, as you know, we are very proud of our footprint from a tight agency point of view. So that's clearly the bread and butter. But this does not mean that we don't do bank assurance. So we have a few cases. Cristiano was just referring to the new agreement in Portugal. We have a joint venture now in India with a bank. So we are going to push bank assurance also in India. We have a successful... relationship with bank assurance in Spain, and you should not forget Banca Generale, which is also a bank assurance relationship, and clearly if there are other opportunities in Italy, we are going to look at that. So there is, you know, our belief is if you have a business model centered around bank assurance, that can be a little bit tricky, but if bank assurance is clearly a selectively use it can enhance the franchise value and also the scale of the operation. So from that point of view, if we find the right partner, we are very happy to engage with these business partners.

Hi Farouk, so going to the non-operating part, first of all, I confirm you that by year end 2025 versus year end 2024, 80 million euros for non-operating cost will be, there has been already 60 because it's pretty linear throughout the year. evenly split between life and PNC will be booked in the operating and have already been booked into operating result from the non-operating like it was last year. And this is done and is going already to reduce the expected projected non-operating charge going forward from the next years. In this quarter specifically, there has been one effect, and as Giulio was referring to Portugal, I'm referring back to India, where we, probably you read, we set up a joint venture with our partner, and the cost of this setup was having a one-off charge related also to the setup, the marketing, and all the effect of around €60 million, which is clearly related to a specific business development. Having said that, speaking about the restructuring costs, and by the way, this is a PV take, so it's one for now and not anymore, what I was saying in India, because it's taking the full charge projected in PV. For what regards the restructuring charges, We are in a year where we have already exploited Germany restructuring, which will allow to better improve the JECS ratio, General Expenses Ratio, for the future years and allow the improvement and digitalization of the company with the relative efficiencies. On top of that, we are in the process of implementing the liberty integration and the We are in advance towards that, so that's why we can see something more in the fourth quarter together with other countries where we are accelerating potential restructuring. That's why I was mentioning the fourth quarter with further restructuring charges. Clearly, this will be counterbalanced by a much better tax rate because of some So I would say there are two kinds of forms of one-off, but the first one is forward-looking, projecting the restructuring acceleration to have a better trajectory, and I confirm you that the non-operating charges are materially going down for the next year. Thank you very much.

Thank you, Farouk. Next question, please.

The next question is a follow-up from Michael Hotner, Berenberg. Please go ahead.

So here's my difficulty or my challenge. So your earnings are... I look at your consensus sheet and look at what you're saying. It's like it's the same number, right? I mean, they're small variances, but there's a lot of accuracy here. But listening to you guys, it's like you're bubbling with excitement and stuff. And So for me, the difference is, I think what, Julia, you were trying to explain to remind me of is there's a difference between IFRS, which is CSM, which is incredibly slow. You have to fill the bathtub and wait for ages for the tap, the water to come out. And then local gap, which is not IFRS. Now, the reason I ask this is always cash. So is there more upside potentially in the cash than we're seeing in these numbers at the moment? Yeah.

So, Michael, of course, this question is for Cristiano.

So, Michael, let me say related to the CSM bathtub point that you were mentioning. Not necessarily a higher life production materializes in a better CSM versus a local gap because, as you know, sorry, a better local gap versus CSM. versus CSM, because CSM sometimes has a revenue recognition, and this revenue recognition is pro-rata temporary. Sometimes in the new approach, you forget about the acquisition cost when you do many business, and you have them immediately to be paid on the cash side, no? So clearly on the CSM, this is amortized through the Revenue recognition is called contractual service margin because you amortize it for the time of the service you give to the client. So the point is the CSM is a present value while the local gap takes into account of the actual amount that you are usually paying. So it's slightly more prudent in the life. So there is a gap, usually negative, between the contractual service margin result and cash in a growing business, clearly. If you are just making a company to run off, which is not the case of Generali, you can have the opposite, but that is a different business model, especially for other integrators or runoffers, let's call them. But for what regards the cash element, the positive trend should come, in my opinion, you should read it from the acceleration of the PNC trajectory versus what we were projecting in the plan. And that is... because one thing i always report to to the board is the exactly almost equivalence between finance expenses a discounting at this level these two non-cash item of the operating result pnc pnl are canceling each other so the results you are seeing is cash that will be a better driver together with the improvement on some let's say cash trap as our favorite switzerland topic

Brilliant. Really clear. Lovely. So at the next call, I can ask you if you've got a spare billion for investors. Sorry, I'm joking. Thank you. Thank you.

Thank you, Michael. Next question, please.

As a reminder, if you wish to register for a question, please press star and one on your telephone. For any further questions, please press star and one on your telephone. We do have a follow-up question from Michael Hartner in Barenburg. Please go ahead.

I'm really sorry. It's a tiny question. In the past, you've always mentioned Argentina as a kind of negative adjustment, as it were. And I think this morning, I don't think, I'm not sure you mentioned it in your introductory remarks, but when I was speaking to your wonderful IR, really wonderful IR, they did mention, and it sounds like Argentina is now turning to be a positive. Is there something there?

Michael, I think in the third quarter you observed a fluctuation. There was a positive contribution from, I think you are referring to the P&C component for Argentina, and instead of having a negative delta in the investment result, you had a small 7 million positive in this quarter. Be mindful that Argentina is extremely, let's say, volatile in nature because of the way it does not follow the basic financial textbook rules that we know. Last year, first of all, when you manage Argentina PNC business, you have... Basically, your investments, all inflation linked because you need to be able to carry up, catch up with the cost of your liabilities. And so the investments are mainly inflation linked in that environment. Last year, we had a huge spike of inflation. huge, materially huge. I'm talking about something in the order of 200%. And that was getting to a point where the exchange rate was not following the international Fisher parity. So we were having massive positive contribution of inflation-linked component in the investment result without having a deep equivalent depreciation that basic finance should tell you should be followed. That's why we had this push-up When you look this topic into isolation and you isolate investment results versus the other part of the PNC, you can get things which could be completely offsetting, but you are seeing a very huge number on one side and on the other. If I take the PNC operating result at nine months of Argentina, it's 14 million euros. So I hope this helps. for you to better understand. But last year was a very, very peculiar year because of that effect. By the way, the movement of the excess capital from life in Argentina in the fourth quarter of 2024 that we made is affecting us in the life investment operating result, $39 million this year on a like-for-like basis. So it was not an immaterial effect due to this, let's say... paradox or non-rational movement between inflation and FX rate.

Very clear. Thank you very much.

Thank you, Michael. Next question, please.

The next question is from Elena Perini in Tiso San Paolo. Please, go ahead.

Yes. Thank you for taking my questions. I've got only one, actually. Considering that you are improving your PNC trajectory and you mentioned that some further cash can come from this improvement, are you going to use part of it to make other projects I don't know, bolt-on acquisitions to strengthen your presence in some markets. And then can you elaborate a bit on what could be the potential targets? Thank you.

Thank you very much, Elena. Giulio, would you like to take this one?

First of all, really the good thing is to add the capital, to add the liquidity. From a M&A point of view, I'll just tell you, right now we don't see much in the pipeline. So from that point of view, clearly we can find a good target. We would definitely look into that. As you know, our preference is to do acquisition where we can realize cost synergies, we can strengthen the franchise. I tell you, Liberty is a great example of an acquisition where we can really create a Value, as of now, as of the moment I tell you, there is not really much happening. On the question between them, clearly every time we do an M&A, we are measuring the M&A against the buyback. And when we say we are measuring the M&A against the buyback, it's not just a comparison of the IRR because, as you know, the IRR can be very dependent on the terminal value. but that's really about the EPS accretion that we get three or four years, let's say four or five down the road. So if we find anything which is interesting, we're going to go for that, making sure that we can create real value, but at the moment there is not much.

Okay, thank you. Thank you, Elena. Next question, please.

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